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The Empirics of Trade and Growth : Where are the Policy Recommendations ?

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  • Klaus, WAELDE

    (European Commission-Brussels and University of Dresden-Germany and CESifo and IRES-Université Catholique de Louvain)

  • Christina, WOOD

    (The World Bank, PREM, West Africa Group, Washington)

Abstract

Existing literature repeatedly documented a strong correlation between trade and growth. It has also shown a causal effect of imports (though not necessarily exports) on growth in simultaneous equation models but to a lesser extent in Granger-causality tests. Export and import taxes have sometimes been found to negatively affect growth. Drawing policy conclusions from these general findings for a particular country is difficult not only because of the contradictory results but also because of potential second best world effects and the implied endogeneity of trade policy. Policy recommendations for a specific country require a careful analysis of market and institutional arrangements and can not be based on the existing cross-country literature.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2004013.

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Length: 20
Date of creation: 01 Mar 2004
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Handle: RePEc:ctl:louvir:2004013

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Keywords: Theoretical and Empirical Trade and Growth Studies; Policy Recommendations;

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Cited by:
  1. Scott L. Baier & Jeffrey H. Bergstrand, 2004. "Trade agreements and trade flows: Estimating the effect of free trade agreements on trade flows with an application to the European Union," European Economy - Economic Papers 214, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  2. Guisan, M.C. & Exposito, P., 2006. "Production by sector in China, India and OECD Countries, 1985-2005," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 6(2).
  3. Grieben, Wolf-Heimo & Sener, Fuat, 2009. "Globalization, rent protection institutions, and going alone in freeing trade," European Economic Review, Elsevier, vol. 53(8), pages 1042-1065, November.
  4. Yigit, Taner M. & Kutan, Ali M., 2004. "European integration, productivity growth and real convergence," ZEI Working Papers B 08-2004, ZEI - Center for European Integration Studies, University of Bonn.
  5. Guisan, M.C. & Exposito, P., 2005. "Industry and Foreign Trade in India, China and OECD countries: an analysis of causality, 1960-2002," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 2(3), pages 5-16.
  6. World Bank, 2002. "The Federal Democratic Republic of Ethiopia : Developing Exports to Promote Growth," World Bank Other Operational Studies 15422, The World Bank.
  7. Wälde, Klaus, 2000. "Does trade cause growth? A policy perspective," Dresden Discussion Paper Series in Economics 10/00, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.

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